Demographic Dividend

A useful indicator for the demographic transition in a country is its “dependency ratio”. This compares the number of juveniles and senior citizens with those of working age who support them, either directly or through government services funded by taxation.

A high dependency ratio is causing considerable concern in mature economies, where funding of health, care and pension provision is inadequate to support ballooning numbers of older people, living ever longer.

By contrast, many poorer countries are at an earlier stage of the demographic transition, with low dependency ratios. In theory these countries should be able to face the future with more confidence, their populations dominated by potentially productive young people. The UN’s World Population Prospects 2017 reports that only 5% of Africa’s population is aged over 60; in Europe the figure is 25%.

The economic potential of a low dependency ratio is often described as the “demographic dividend” and has been associated with the tiger economies of East Asia. Some economists interpret recent strong rates of growth in Africa as evidence of this demographic dividend.

Others suggest that most sub-Saharan African countries have not yet reached the optimum dependency ratio, with too large a proportion of children, not yet economically productive. Furthermore, the trend to lower fertility rates is too slow; at current rates Nigeria is considered to be decades away from an advantageous profile. Governments of these countries should be responsive to advocacy for policies which encourage later pregnancies and smaller families.

The demographic dividend is a fleeting opportunity which can quickly overturn into social unrest, as illustrated by the dramatic events of recent years in several Arab countries. Very high rates of youth unemployment do indeed persist in Africa and the Middle East; investment in education and training is desperately needed.

Many economists interpret the demographic mismatch between richer and poorer countries as a force for globalisation. This view suggests that, regardless of any domestic economic dividend, the imbalance will be a long term driver of labour migration, ultimately redressing the falling populations of Europe in particular.

For the time being, politicians shrink from the rational solution of encouraging migrant workers from African countries and others with low dependency ratios.  They prefer to provide tax breaks and other incentives for women to have more children. The presence of such incentives in over 50 countries, including Denmark, Germany, Japan and China, is an awkward context for lecturing poorer countries on population control.


Harnessing the demographic dividend in Africa
Al Jazeera interview with Eliya Zulu, Executive Director and founder of the African Institute for Development Policy

Demographic Dividend explained
by UN Population Fund

more Population briefings (updated (March 2018)
World Population Projections
Demographic Transition
Population Policies
Opposition to Family Planning
Overpopulation or Overconsumption?
Source material and useful links

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